By Roxanne Henderson and Antony Sguazzin for Business Day
The Reserve Bank has written to the National Credit Regulator requesting a probe of loan-origination fees charged by Capitec, according to a person familiar with the matter.
The referral came after the issue was raised in a report by short-seller Viceroy Research in January, said the person, asking not to be identified because the matter is private.
The investigation is ongoing, the person said.
On Tuesday, Capitec shares were trading down 1.9% at R870.89 at 9.05am on the JSE.
Capitec chief financial officer Andre du Plessis said he was unaware of the central bank’s referral, or of an investigation by the Johannesburg-based credit watchdog.
In the report, Viceroy said Capitec’s income was boosted by excessive fees on its multiloan product, which carried a monthly charge for allowing a previously vetted customer to extend their facility by answering some questions.
While Capitec said it terminated the product in 2016 — after rules introduced by the NCR meant it was no longer viable — Viceroy said the lender rebranded it and that Capitec’s methods risk over-indebting consumers.
Capitec denied this, saying Viceroy did not understand how the product or its processes work.
The NCR had previously probed the multiloan facility and was satisfied with the fees and interest charged, Capitec said on February 8.
Both the Johannesburg-based NCR and Pretoria-based central bank declined to comment.
The central bank monitors lenders for their compliance with rules ranging from their operations and capital levels to staffing and money laundering, with the ability to fine companies or revoke their licenses. The NCR can also administer financial penalties on lenders which violate the National Credit Act, legislation aimed at protecting consumers from becoming over-indebted.
Officials from the central bank and the NCR told MPs in March that many of the allegations made by Viceroy were not new and that not all of them were accurate.
“The Reserve Bank is very active in doing ongoing reviews at all the banks,” said Du Plessis, speaking more broadly on the regulator’s oversight. “If anything bothers them, they actually contact us or ask that we report on something. That happens on an ongoing basis.”
On Friday, Capitec announced it had reached an agreement with Summit Financial Partners, which was challenging the lender in court and before the NCR on behalf of six complainants.
The cases, which mostly centred on Capitec’s now defunct multiloan facility, were withdrawn.
Capitec’s stock has declined 19% this year, more than any of the other lenders on the six-member FTSE/JSE Africa banks index, which is down 5.6%.
By Hanna Ziady for Business Live
Payments between SA’s banks, averaging R350-billion daily, can be settled using blockchain technology, tests demonstrate.
“Project Khokha”, whose results the Reserve Bank announced on Tuesday, successfully trialled interbank settlements using distributed ledger technology (DLT), of which blockchain, the mainstay of cryptocurrencies such as bitcoin, is one type.
Distributed ledgers use independent computers to record, share and synchronise transactions in online ledgers, without the need for an independent third party to verify those transactions. DLT could “fundamentally change the financial sector, making it more efficient, resilient and reliable”, according to the World Bank. In the long term, it could usurp a large portion of the work performed by trusted intermediaries such as banks and clearing houses.
Central banks around the world, meanwhile, are grappling with the implications of financial technology (‘fintech’) for financial markets and their supervisory roles in those markets. That Project Khokha has been a success puts the Bank at the cutting edge of developments in DLT, alongside the likes of the Bank of Canada and Singapore’s central bank.
The trial was designed, built and executed in three months. Key role-players included the Bank’s fintech unit, established in August 2017, and SA’s six biggest banks, as well as newcomer Discovery Bank.
The results show that the typical daily volume of SA’s payments system, averaging R350bn, could be processed on a distributed ledger in less than two hours with full confidentiality of transactions.
This has considerable implications for future applications of blockchain technology in SA. Future “blockchain experiments” might involve other central banks on cross-border payments, said Bank governor Lesetja Kganyago.
The Bank had “pushed the envelop in a number of ways” on the project, said Peter Munnings, technical lead of enterprise delivery at New York-based ConsenSys, a blockchain software technology firm and the Bank’s technology partner.
“There are many issues to consider before the decision to take a DLT-based system into production can be taken,” the Bank said.
“Some of these issues relate to the practicalities of implementation, but also to legal and regulatory factors, and to the broader economic impact.”
One of the objectives of Project Khokha was to better understand how the South African Multiple Option Settlement (SAMOS) system would integrate with a DLT system. SAMOS is the current interbank settlement system provided by the Bank, allowing banks to settle their obligations in real-time.
By Sibongile Khumalo for News24
The South African Reserve Bank in 2017 imposed a total of R77.5-million in administrative fines to China Construction Bank and VBS Mutual Bank for failure to comply with the Financial Intelligence Centre Act.
The Bank Supervision Department annual report released on Tuesday indicated that the banks were penalised for “not identifying and verifying their customers’ details, not keeping records of customer identification, inadequate controls and working methods pertaining to the reporting of suspicions transactions”.
The heaviest fine of R75m was given to the Johannesburg branch of China Construction Bank Corporation – R20m was suspended for a period of three years.
The Venda-based VBS bank, which made headlines in 2016 when it granted former president Jacob Zuma a R7.9m loan for his Nkandla home, was fined R2.5m, of which R2m was suspended for a year.
The Reserve Bank last year placed VBS under curatorship, as details of its financial management came to light.
The report stated that the decision to impose the sanctions was not based on any evidence that the banks had “facilitated transactions relating to money laundering and/or the financing of terrorism”.
It revealed that its assessment of financial institutions showed that banks still needed to strengthen their controls when it comes to compliance with the FIC Act.
Compliance with Pillar 3 disclosure system, which require banks to publish easily accessible information that reflects their financial conditions, performance, risk exposure and corporate governance policies and policies was also a key area of focus.
During the 2017 period, a total of 28 illegal deposit-taking schemes were under review, 21 of them were carried over from the previous years, while 7 were new investigations. There are currently 19 schemes still under investigation, slightly higher than the 21 cases in 2016.
The bank said the regulation of schemes was done to ensure “the safety and integrity of the banking system and to protect the general public”.
According to the report, macroeconomic conditions continue to be unsupportive of meaningful and robust growth in credit extension, as appetite for household credit also remains sluggish.
Credit extension to the corporate sector grew modestly.
“Although household debt metrics continue to show signs of improvement, household debt remains persistently high.”
The report also noted that market uncertainty was seen throughout the year, both at global and domestic level.
The rand weakened over the period by 1.3%, and bonds also weakened with the depreciation of the currency.
The legitimacy of the Public Protector’s office and her reputation may be damaged if she takes a dismissive or procedurally unfair approach as she has done in the matter regarding the South African Reserve Bank (SARB), Judge John Murphy said.
The judgment, delivered on Tuesday by Justice Cynthia Pretorius on behalf of Murphy, sets aside Public Protector Busisiwe Mkhwebane’s remedial action.
According to a report issued by the Public Protector’s office in June, which was based on an investigation into the apartheid-era Bankorp bailout, Mkhwebane ordered that the Reserve Bank’s constitutional mandate to protect the currency be changed instead to ensure the socio-economic well-being of citizens and the achievement of socio-economic transformation.
Mkhwebane also ordered the Reserve Bank and the chairperson of the portfolio committee on justice and correctional services to submit an action plan before August 18. This has also been set aside.
In his judgment, Murphy said that it is “disconcerting” that Mkhwebane seems “impervious” or “disinclined” to address criticism of her conduct during the investigation.
Murphy acknowledged that the Public Protector has a difficult task and is expected to deal with complex and challenging maters with limited resources and without the “benefit of rigorous forensic techniques”. This would make it easy to make errors in informal alternative dispute resolution processes.
But Murphy added that the Public Protector is the “constitutionally appointed custodian” of legality and due process in the public administration. “She risks the charge of hypocrisy and incompetence if she does not hold herself to an equal or higher standard than that to which she holds those subject to her writ,” he said.
“A dismissive and procedurally unfair approach by the Public Protector to important matters placed before her by prominent role players in the affairs of state will tarnish her reputation and damage the legitimacy of the office.”
Murphy said the Public Protector should reflect “more deeply” on her conduct during this particular investigation, and she should consider the criticism made by the SARB and Parliament.
Professor Jannie Rossouw, head of the Wits School of Economic and Business Science, said that if the matter had gone any other way, it would have been a “constitutional crisis”. “From that perspective it is a very positive judgment,” he said.
‘Maybe she should just resign’
The judgment also raises questions on whether Mkhwebane is fit to hold office, he said. “Maybe she should do the honourable thing and just resign.”
Econometrix chief economist Dr Azar Jammine said the ruling may have damaged the image of the Public Protector, and that some may argue that her days are numbered. He said the ruling showed the strength of South Africa’s institutions and the judiciary.
A different judgment would not have been viewed favourably by ratings agencies, he said.
By Lameez Omarjee for News24
The South African Reserve Bank held interest rates steady‚ as widely expected‚ on Tuesday‚ at the monetary policy committee’s first meeting of the year.
While economists have cautioned against calling an end to the tightening cycle and the start of lower interest rates — especially after consumer inflation came in at 6.8% last week — they did not expect an increase.
Tuesday’s decision left the repo rate unchanged at 7%. The Bank has raised rates by 75 basis points since the start of 2015‚ and by 200 basis points since January 2014. The last rate increase was 25 basis points in March 2016‚ and followed a 50-point rise in January 2016.
South Africa’s current account deficit widened as expected to 4,1% of gross domestic product (GDP) in the third quarter from 3,1% in the second quarter, the Reserve Bank’s quarterly bulletin showed on Tuesday.